(Click on image to enlarge it)
(This is Part 7 of a series. Go back to Part 6.)
Here at the two week level, we see that the –TX had crossed above the +TX on 1/12/2001 (labeled pt. A’), indicating a bearish tone to the market. However, with BTX below 35, we shouldn’t expect much trending behavior from the market. Remember that the monthly BTX was also below 35, and the –TX crossed above the +TX in March 2001. Therefore, our analysis tells us to anticipate a downward bias (due to the position of the –TX above the +TX on both time frames), but since BTX is below 35 on both time frames, the move will probably not gain momentum unless and until BTX exceeds the trend threshold of 35.
The next events of significance occur in mid June 2001 when BTX rises above 35 (labeled pt. A), and the +TX and –TX lines make small opposing pivots (labeled B’) and begin to separate from one another. When BTX crosses the trend threshold of 35, we should expect to see some trending price action, and remember that BTX had risen above 35 on the monthly chart during May. Also, since the simultaneous pivots of the TX lines (pt. B’) occur in conjunction with trend identification on dual time frames, the move down should have some thrust behind it.
In fact, prices decline into early Nov. 2001, as BTX tops out and generates a pivot high at an extreme reading of 61 and beyond the upper standard deviation line (labeled pt. B). Also remember that the monthly BTX made its peak during October at a reading of 53, so once again we have dual time frame agreement of an impending end to the down trend. Additionally, the TX lines also create commensurate pivots at levels beyond their respective SD bands (pts. C’), confirming the likelihood of a bottom in prices.
As mentioned in the monthly discussion pertaining to STX, when the BTX on the monthly chart achieved trend scores in the high 40’s and 50’s (as was the case at pt. B on the monthly which was the month ending Oct. 31, 2001), it should have tipped us off that the correct way to take advantage of that information was to roll down to a lower timeframe to find a more precise exit via the STX.
Now here at the 2-week time frame we see that STX had tracked the decline almost perfectly, remaining just above the highs of the bars throughout the decline into the 2-week bar ending 11/2/01 (labeled via the triangle on the price bars). Then on the following bar ending 11/16/01, when BTX rolled over to generate its first lower value (at pt. B), prices rose through the STX stop, indicating it was time to exit this trade. As you can see, that exit location proved to be almost perfect in terms of capturing all that the market had to offer on the short side.
The high monthly BTX in Oct. told us to roll down to a lower time frame looking for a better exit via the STX. In fact, the STX value on the monthly that would have stopped us out was at 72.20, vs. the STX level here on the 2-week chart of 65.00. That’s 7.2 cents (144 ticks at $12.50 per tick), or an $1,800 better exit by utilizing the STX from the lower time frame.
This should vividly demonstrate the power of why high time frame information should be utilized to roll down to lower time frames attempting to identify better exit locations. Hopefully, this example also showcases the efficiency and accuracy of the STX stop mechanism to provide high quality exit locations.
As we had discussed in the monthly example, a topping or bottoming process from BTX and the TX lines is a three-step affair. First BTX turns down from a high value (greater than 50 or so). Then the subordinate TX line crosses above its center moving average (CMA), and finally the dominant TX lines crosses below its CMA.
Note the BTX downturn at pt. B, which is then followed by the green TX line crossing above its CMA (shown via arrow), and the red TX line crosses below its CMA (also shown as arrow). It’s worthy of note that as the TX lines crossed their CMAs, the STX stop was violated, further confirming the significance of the bottom that was forming here in late 2001.
The next Ocean Plus event of note is when BTX crosses back below the trend threshold of 35 during the two week period ending 2/22/02 (pt. C), indicating that the market is likely to enter a period of congestion and no trend. Remember also that the BTX on the monthly chart crossed below 35 in Feb. ’02 as well, so again, the dual time frame agreement tells us this market is probably going to get fairly quiet. However, due to the position of the TX lines (that is, +TX > its CMA, and –TX < its CMA), the market will probably maintain a bullish bias, albeit moving with less thrust than would be the case if a trend component were present.
The market then maintains a slightly bullish tone as the TX lines continue to separate into late June 2002. Then the TX lines make a bearish pivot (pt. 1) - with the dominant TX (green line exceeding its upper SD band - and begin to converge upon one another. This marks the end to the multi-month low trend meandering advance.
While this example of Copper has been used to demonstrate the benefits of the Ocean Plus tools, there are times when the value of the Standard Ocean tools is so compelling that I need make reference to them as well. This period between late 2002 and mid 2003 is just such a period. I’ve labeled this primary chart to indicate where and when Ocean NMC, NMC2, and NXC Zero Hits are occurring, and there is another chart available where I have zoomed in on this period to demonstrate the events being discussed.
(This is the end of Part 7. Go to Part 8.)
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